Baghdad, Beirut, Doha

Trade-talks failure a blow to US strategy in Mideast

by Leon Hadar

In addition to being the capitals of three Middle
Eastern countries, Baghdad (Iraq), Beirut (Lebanon), and Doha (Qatar) have something
else in common, and it's President George W. Bush's global policy. While the
violence taking place in Baghdad and Beirut is a direct consequence of the collapse
of Bush's Middle East policy and much of its geo-strategic approach, the breakdown
of the Doha round of trade talks is a reflection of the failure of the Bush
administration to project U.S. leadership in the global economic arena. If Washington
does not take immediate steps to reevaluate and re-energize its role in global
affairs, then not only the United States but the entire international system
could be threatened.

Clearly, the Doha Round was a way to link America's strategy to promote its
interests and values in the Middle East, the efforts to continue to liberalize
global trade and the U.S.-led war on terrorism. In fact, one of the reasons
that the latest round of trade negotiations was launched in the capital of one
of the most prosperous economies in the Middle East after the terrorist attacks
of Sept. 11, 2001, was to demonstrate that contrary to al-Qaeda's ideology,
Islam and capitalism were compatible, and that an economy like that of Qatar,
committed as it is to the principles of free trade, can thrive at the center
of the Arab Middle East.

Moreover, the message coming out of the post-9/11 Doha meeting was that liberalizing
global trade, which creates the conditions for economic growth in the Third
World, could also be the most effective way to weaken the appeal of Islamic
radicalism. It was al-Qaeda and its terrorist networks – and not the Middle
East and the Muslim world – that were not compatible with free markets
and economic prosperity.

It is in this context that we have to consider the collapse of the talks in
Geneva aimed at reaching a global market-opening agreement under the auspices
of the World Trade Organization. Yes, the breakdown in the talks had to do with
the technical and somewhat esoteric problems involving farm subsidies and related
trade policies and their intertwining with domestic politics. But against the
backdrop of the mess in Iraq and Lebanon and the inability of the U.S. and its
allies to resolve the crises there, the decision to shelve the 5-year-old talks
to dismantle market barriers provided a very dramatic and even tragic soundtrack
to the current depressing Middle Eastern movie.

Indeed, the original ambition of the Doha Round was to produce an agreement
by the end of 2004 and boost trade by as much as $800 billion, according to
the World Bank. The bank has already scaled back its prediction of a trade accord's
value to as little as $96 billion, and the current deadlock would threaten even
this kind of modest gain. Estimates show that relatively open economies had
a gross domestic product more than seven times higher, and grew at a rate more
than eight times faster, than the least open economies. Hence the stalemate
in the Doha Round will only make it more certain that it will be impossible
to lift out of poverty millions of people in the Middle East (and elsewhere),
ensuring that the environment in that region will be conducive to promoting
Osama bin Laden's strategy of hatred and violence.

As most analysts agree, there is a lot of blame to go around in trying to figure
out who was responsible for the collapse of the trade negotiations, including
the refusal of India and Brazil to cut customs duties in industrial goods and
the resistance by the European Union to cut its protective tariffs on commodity
tariffs. But the main obstacle to the agreement was the failure by political
leaders in the major economies to stand up to their respective agricultural
lobbies. From that perspective, the Bush administration has been certainly guilty
of pandering to American farmers by dispensing to them huge subsidies.

But in the previous global trade rounds, U.S. officials recognized that America's
willingness to open its markets to foreign imports was not really a form of
concession but a necessary step to be taken by the driving force in the multilateral
trading system to ensure that it remains open. After all, it is the American
economy that ends up enjoying the greatest benefits from global free trade.
Unfortunately, the White House and Congress seem to be more inclined now to
respond to protectionist pressure than to pursue the kind of trade policy that
will benefit both the American and the global economy. And after the White House
loses its fast-track trade negotiating authority next year, it will become even
more difficult to push for trade liberalization in Washington.

There is no doubt that President George W. Bush's political weakness at home,
resulting primarily from the growing costs of U.S. policies in Iraq and the
Middle East, made it challenging for him to win domestic support for adopting
a more courageous stand in Geneva, which could have prevented the collapse of
the talks.

But the irony is that this blow to the Doha Round and the new obstacles to
the process of free trade will make it even more difficult to ignite economic
growth in the Middle East. That could prove to be a setback to the effort to
deal with the core political problems affecting Baghdad and Beirut, or for that
matter, Gaza, Cairo, and Amman.